EXHIBIT 4.1
California Water Service Company
Fourth Supplement to Note Agreement
Dated as of August 15, 2002
Re: $20,000,000 5.90% Series F Senior Notes
Due November 1, 2017
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Fourth Supplement to Note Agreement
Dated as of
August 15, 2002
To the Purchasers named in
Schedule A hereto
Ladies and Gentlemen:
This Fourth Supplement to Note Purchase Agreement (the "Fourth Supplement") is
between California Water Service Company (the "Company") whose address is 0000
Xxxxx Xxxxx Xxxxxx, Xxx Xxxx, Xxxxxxxxxx 00000 and the institutional investors
named on Schedule A attached hereto (the "Purchasers"). Reference is hereby made
to that certain Note Agreement dated as of March 1, 1999 (the "Note Agreement")
between the Company and the purchasers listed on Schedule I thereto. All
capitalized terms not otherwise defined herein shall have the same meaning as
specified in the Note Agreement. Reference is further made to Section 4.3
thereof which requires that, prior to the delivery of any Additional Notes, the
Company and each Additional Purchaser shall execute and deliver a Supplement.
The Company hereby agrees with the Purchasers named on Schedule A hereto as
follows:
1. The Company has authorized the issue and sale of $20,000,000 aggregate
principal amount of its 5.90% Series F Senior Notes due November 1, 2017 (the
"Series F Notes"). The Series F Notes, together with the Series B Notes
initially issued pursuant to the Note Agreement, the Series C Notes issued
pursuant to the First Supplement to Note Agreement dated as of October 1, 2000,
the Series D Notes issued pursuant to the Second Supplement to Note Agreement
dated as of September 1, 2001, the Series E Notes issued pursuant to the Third
Supplement to Note Agreement dated as of May 1, 2002 and each Series of
Additional Notes which may from time to time be issued pursuant to the
provisions of Section 1.4 of the Note Agreement, are collectively referred to as
the "Notes" (such term shall also include any such notes issued in substitution
therefor pursuant to Section 9.2 of the Note Agreement). The Series F Notes
shall be substantially in the form set out in Exhibit 1 hereto with such changes
therefrom, if any, as may be approved by the Purchasers and the Company.
2. Subject to the terms and conditions hereof and as set forth in the Note
Agreement and on the basis of the representations and warranties hereinafter set
forth, the Company agrees to issue and sell to each Purchaser, and each
Purchaser agrees to purchase from the Company, Series F Notes in the principal
amount set forth opposite such Purchaser's name on Schedule A hereto at a price
of 100% of the principal amount thereof on the closing date hereafter mentioned.
3. Delivery of the $20,000,000 in aggregate principal amount of the Series F
Notes will be made at the offices of Xxxxxxx and Xxxxxx, 000 Xxxx Xxxxxx Xxxxxx,
Xxxxxxx, Xxxxxxxx 00000-0000 against payment therefor in Federal Reserve or
other funds current and immediately available at the principal office of Bank of
America, ABA No. 000000000, Account No. 14879-00161, Account Name: California
Water Service Company Security Sales, in the amount of the purchase price at
11:00 A.M., San Francisco, California time, on August 27, 2002 or such later
date (not later than August 31, 2002) as shall mutually be agreed upon by the
Company and the Purchasers of the Series F Notes (the "Closing Date").
4. Prepayment of Notes.
(a) Required Prepayments. No prepayments are required to be made with
respect to the Series F Notes prior to the expressed maturity date thereof other
than prepayments made in connection with an acceleration of the Series F Notes
pursuant to the provisions of Section 6.3 of the Note Agreement.
(b) Optional Prepayment with Premium. Upon compliance with Section 4(d)
below the Company shall have the privilege, at any time and from time to time,
of prepaying the outstanding Notes of any Series, either in whole or in part
(but if in part then in a minimum principal amount of $100,000) by payment of
the principal amount of the Notes of such Series, or portion thereof to be
prepaid, and accrued interest thereon to the date of such prepayment, together
with a premium equal to the Make-Whole Amount, determined as of five Business
Days prior to the date of such prepayment pursuant to this Section 4(b).
(c) Optional Prepayment at Par in the Event of Condemnation. In the
event a Material Condemnation shall have occurred with respect to any property
of the Company or a Restricted Subsidiary, then upon compliance with Section
4(d) below the Company shall have the privilege of applying the
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proceeds of any condemnation award received in connection with such Material
Condemnation to the prepayment of the principal amount of the Notes of any
Series then outstanding, or any portion thereof to the extent of such proceeds,
together with accrued interest thereon to the date of such prepayment. Any
optional prepayment made pursuant to this Section 4(c) shall be without premium.
(d) Notice of Optional Prepayments. The Company will give notice of any
prepayment of the Notes pursuant to Section 4(b) or 4(c) to each Holder of Notes
to be prepaid not less than 30 days nor more than 60 days before the date fixed
for such optional prepayment specifying (a) such date, (b) the Section of this
Fourth Supplement under which the prepayment is to be made, (c) the principal
amount of the Holder's Notes to be prepaid on such date, (d) whether a premium
may be payable, (e) the date when the premium, if any, will be calculated, (f)
the estimated premium, together with a reasonably detailed computation of such
estimated premium, and (g) the accrued interest applicable to the prepayment.
Such notice of prepayment shall also certify all facts, if any, which are
conditions precedent to any such prepayment. Notice of prepayment having been so
given, the aggregate principal amount of the Notes to be prepaid specified in
such notice, together with accrued interest thereon and the premium, if any,
payable with respect thereto shall become due and payable on the prepayment date
specified in said notice. Not later than two Business Days prior to the
prepayment date specified in such notice, the Company shall provide each Holder
of a Note to be prepaid written notice of the premium, if any, payable in
connection with such prepayment and, whether or not any premium is payable, a
reasonably detailed computation of the Make-Whole Amount.
(e) Application of Prepayments. In the case of each partial prepayment
of the Notes pursuant to the provisions of Section 4(b) or 4(c), the principal
amount of the Notes of the Series to be prepaid shall be allocated among all of
the Notes of such Series at the time outstanding in proportion, as nearly as
practicable, to the respective unpaid principal amounts thereof.
(f) Direct Payment. Notwithstanding anything to the contrary contained
in the Note Agreement, this Fourth Supplement or the Notes, in the case of any
Note owned by any Holder that is a Purchaser, Additional Purchaser or any other
Institutional Holder which has given written notice to the Company requesting
that the provisions of this Section 4(f) shall apply, the Company will
punctually pay when due the principal thereof, interest thereon and premium, if
any, due with respect to said principal, without any presentment thereof,
directly to such Holder at its address set forth herein or such other address as
such Holder may from time to time designate in writing to the Company or, if a
bank account with a United States bank is so designated for such Holder, the
Company will make such payments in immediately available funds to such bank
account, marked for attention as indicated, or in such other manner or to such
other account in any United States bank as such Holder may from time to time
direct in writing.
(g) Make Whole Amount. The term "Make-Whole Amount" shall mean with
respect to the Series F Notes in connection with any prepayment or acceleration,
the following: the excess, if any, of (a) the aggregate present value as of the
date of such prepayment of each dollar of principal being prepaid and the amount
of interest (exclusive of interest accrued to the date of prepayment) that would
have been payable in respect of such dollar if such prepayment had not been
made, determined by discounting such amounts at the Reinvestment Rate from the
respective dates on which they would have been payable, over (b) 100% of the
principal amount of the outstanding Series F Notes being prepaid. If the
Reinvestment Rate is equal to or higher than 5.90%, the Make-Whole Amount shall
be zero. For purposes of any determination of the Make-Whole Amount for the
Series F Notes, the following terms have the following meanings:
"Reinvestment Rate" shall mean (1) the sum of 0.50%, plus the yield reported on
page "USD" of the Bloomberg Financial Markets Services Screen (or, if not
available, any other nationally recognized trading screen reporting on-line
intraday trading in the United States government Securities) at 10:00 A.M.
(Chicago, Illinois time) for the United States government Securities have a
maturity (rounded to the nearest month) corresponding to the Remaining Life to
Maturity of the principal of the Notes being prepaid or (2) in the event that no
nationally recognized trading screen reporting on-line intraday trading in the
United States government Securities is available, Reinvestment Rate shall mean
0.50%, plus the arithmetic mean of the yields for the two columns under the
heading "Week Ending" published in the Statistical Release under the caption
"Treasury Constant Maturities" for the maturity (rounded to the nearest month)
corresponding to the Remaining Life to Maturity of the principal being prepaid.
If no maturity exactly corresponds to such Remaining Life to Maturity, yields
for the published maturity next longer than the Remaining Life to Maturity and
for the published maturity next shorter than the Remaining Life to Maturity
shall be calculated pursuant to the immediately preceding sentence and the
Reinvestment Rate
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shall be interpolated from such yields on a straight-line basis, rounding in
each of such relevant periods to the nearest month. For the purposes of
calculating the Reinvestment Rate, the most recent Statistical Release published
prior to the date of determination of the Make-Whole Amount shall be used.
"Statistical Release" shall mean the then most recently published statistical
release designated "H.15(519)" or any successor publication which is published
weekly by the Federal Reserve System and which establishes yields on actively
traded U.S. Government Securities adjusted to constant maturities or, if such
statistical release is not published at the time of any determination hereunder,
then such other reasonably comparable index which shall be designated by the
Holders holding 66-2/3% in aggregate principal amount of the outstanding Series
F Notes, subject to approval of the Company which approval will not be
unreasonably withheld.
"Remaining Life to Maturity" of the principal amount of the Series F Notes being
prepaid shall mean, as of the time of any determination thereof, the number of
years (calculated to the nearest one-twelfth) which will elapse between the date
of determination and the final maturity of the Series F Notes being prepaid.
5. Closing Conditions.
(a) Conditions. The obligation of each Purchaser to purchase the Series
F Notes on the Closing Date shall be subject to the performance by the Company
of its agreements hereunder which by the terms hereof are to be performed at or
prior to the time of delivery of the Series F Notes and to the following further
conditions precedent:
(i) Closing Certificate. Such Purchaser shall have received a
certificate dated the Closing Date, signed by the President or a Vice President
of the Company, the truth and accuracy of which shall be a condition to such
Purchaser's obligation to purchase the Series F Notes proposed to be sold to
such Purchaser and to the effect that (1) the representations and warranties of
the Company set forth in Exhibit 2 hereto are true and correct on and with
respect to the Closing Date, (2) the Company has performed all of its
obligations hereunder which are to be performed on or prior to the Closing Date,
and (3) no Default or Event of Default has occurred and is continuing.
(ii) Compliance Certificate. Such Purchaser shall have received a
certificate dated the Closing Date, signed by the Senior Financial Officer of
the Company stating that such officer has reviewed the provisions of the Note
Agreement and this Fourth Supplement and setting forth the information and
computation (in sufficient detail) required in order to establish whether the
Company is in compliance with Section 5.6 of the Note Agreement on the Closing
Date.
(iii) Legal Opinions. Such Purchaser shall have received from Xxxxxxx
XxXxxxxxx LLP, counsel for the Company, and Xxxxxxx and Xxxxxx, special counsel
for the Purchasers, their opinions dated the Closing Date, in form and substance
satisfactory to such Purchasers, and covering the matters set forth respectively
in Exhibits 3 and 4 hereto.
(iv) Regulatory Approval. Prior to the Closing Date, the issue and sale
of the Series F Notes shall have been duly authorized or approved by appropriate
order of the Public Utilities Commission of the State of California (the
"Commission"). Such order shall be final and in full force and effect and not
subject to any appeal, hearing, rehearing or contest. All conditions contained
in any such order which are to be fulfilled on or prior to the issuance of the
Series F Notes shall have been fulfilled. The Company shall have delivered to
the Purchasers and their special counsel a certified copy of such order and the
application therefor.
(v) Related Transactions. The Company shall have consummated the sale
of the entire principal amount of the Series F Notes scheduled to be sold on the
Closing Date pursuant to this Fourth Supplement.
(vi) Satisfactory Proceedings. All proceedings taken in connection with
the transactions contemplated by this Fourth Supplement, and all documents
necessary to the consummation thereof, shall be satisfactory in form and
substance to such Purchaser and such Purchaser's special counsel, and such
Purchaser shall have received a copy (executed or certified as may be
appropriate) of all legal documents or proceedings taken in connection with the
consummation of said transactions.
(vii) Purchase Permitted By Applicable Law. On the Closing Date, the
purchase of Series F Notes shall (a) be permitted by the laws and regulations of
each jurisdiction to which any Purchaser is subject, without recourse to
provisions (such as Section 1405(a)(8) of the New York Insurance Law) permitting
limited investments by insurance companies without restriction as to the
character of the particular investment, (b) not violate any applicable law or
regulation (including, without limitation, Regulation U, T or X of the Board of
Governors of the Federal Reserve System) and (c) not subject any Purchaser to
any tax, penalty or liability under or pursuant to any applicable law or
regulation, which law
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or regulation was not in effect on the date hereof. If requested by any
Purchaser, such Purchaser shall have received an Officer's Certificate
certifying as to such matters of fact as such Purchaser may reasonably specify
to enable such Purchaser to determine whether such purchase is so permitted.
(viii) Payment of Special Counsel Fees. The Company shall have paid, on
or before the Closing Date, the fees, charges and disbursements of the
Purchasers' special counsel referred to in (iii) above, to the extent reflected
in a statement of such counsel rendered to the Company at least one Business Day
prior to the Closing Date.
(ix) Private Placement Number. A Private Placement Number issued by
Standard & Poor's CUSIP Service Bureau (in cooperation with the Securities
Valuation Office of the National Association of Insurance Commissioners) shall
have been obtained for the Series F Notes.
(b) The obligation of the Company to deliver the Series F Notes
hereunder is subject to the conditions that (i) the Commission shall have
authorized the issuance and sale by the Company of the Series F Notes at the
price herein provided and said authorization shall be in full force and effect
and (ii) the entire principal amount of the Series F Notes scheduled to be sold
on the Closing Date pursuant to this Fourth Supplement shall have been tendered
by the Purchasers. If the condition specified in this Section 5(b) shall not
have been fulfilled prior to or on the Closing Date, this Fourth Supplement and
all the obligations of the Company hereunder, except as provided in Section 9.4
of the Note Agreement, may be cancelled by the Company.
(c) If on the Closing Date the Company fails to tender to any Purchaser
the Series F Notes to be issued to any Purchaser on such date or if the
conditions specified in Section 5(a) have not been fulfilled, such Purchaser may
thereupon elect to be relieved of all further obligations under this Fourth
Supplement. Without limiting the foregoing, if the conditions specified in
Section 5(a) have not been fulfilled, such Purchaser may waive compliance by the
Company with any such condition to such extent as such Purchaser may in its sole
discretion determine. Nothing in this Section 5(c) shall operate to relieve the
Company of any of its obligations hereunder or to waive any Purchaser's rights
against the Company.
6. Each Purchaser represents and warrants that the representations and
warranties set forth in Section 3.2 of the Note Agreement are true and correct
on the date hereof with respect to the Series F Notes purchased by such
Purchasers.
7. The Company and each Purchaser agree to be bound by and comply with the terms
and provisions of the Note Agreement as if such Purchaser were an original
signatory to the Note Agreement.
The execution hereof shall constitute a contract between the Company and the
Purchaser(s) for the uses and purposes hereinabove set forth, and this agreement
may be executed in any number of counterparts, each executed counterpart
constituting an original but all together only one agreement.
California Water Service Company
By Name: Xxxxxx X. Xxxxxx
Title: Vice President, Chief Financial Officer and Treasurer
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[Form of Series F Note]
This Note has not been registered with the Securities And Exchange Commission
under the Securities Act of 1933, as amended, and any sale, transfer, pledge or
other disposition thereof may be made only (1) in a transaction registered under
said Act or (2) if an exemption from registration under said Act is available.
California Water Service Company
5.90% Series F Senior Note
Due November 1, 2017
PPN: 130789 M@ 6
No. August 27, 2002
$
California Water Service Company, a California corporation (the "Company"), for
value received, hereby promises to pay to
or registered assigns
on the first day of November, 2017,
the principal amount of
Dollars ($____________)
and to pay interest (computed on the basis of a 360-day year of twelve 30-day
months) on the principal amount from time to time remaining unpaid hereon at the
rate of 5.90% per annum from the date hereof until maturity, payable
semiannually on the first day of each May and November in each year (commencing
on the first of such dates after the date hereof) and at maturity. The Company
agrees to pay interest on overdue principal (including any overdue required or
optional prepayment of principal) and premium, if any, and (to the extent
legally enforceable) on any overdue installment of interest, at the rate of
7.90% per annum after the due date, whether by acceleration or otherwise, until
paid. Both the principal hereof and interest hereon are payable at the principal
office of the Company in San Jose, California in coin or currency of the United
States of America which at the time of payment shall be legal tender for the
payment of public and private debts.
This Note is one of a series of Notes (the "Notes") issued pursuant to a
supplement to the Note Agreement dated as of March 1, 1999 (as from time to time
amended and supplemented, the "Note Agreement"), between the Company, the
Purchasers named therein and Additional Purchasers of Notes from time to time
issued pursuant to any Supplement to the Note Agreement. This Note and the
holder hereof are entitled equally and ratably with the holders of all other
Notes of all Series from time to time outstanding under the Note Agreement to
all the benefits provided for thereby or referred to therein. Each holder of
this Note will be deemed, by its acceptance hereof, to have made the
representation set forth in Section 3.2 of the Note Agreement, provided that
such holder may (in reliance upon information provided by the Company, which
shall not be unreasonably withheld) make a representation to the effect that the
purchase by such holder of any Note will not constitute a non-exempt prohibited
transaction under Section 406(a) of ERISA.
This Note and the other Notes outstanding under the Note Agreement may be
declared due prior to their expressed maturity dates, all in the events, on the
terms and in the manner and amounts as provided in the Note Agreement. The Notes
are not subject to prepayment or redemption at the option of the Company prior
to their expressed maturity dates except on the terms and conditions and in the
amounts and with the premium, if any, set forth in the Note Agreement.
This Note is registered on the books of the Company and is transferable only by
surrender thereof at the principal office of the Company duly endorsed or
accompanied by a written instrument of transfer duly executed by the registered
holder of this Note or its attorney duly authorized in writing. Payment of or on
account of principal, premium, if any, and interest on this Note shall be made
only to or upon the order in writing of the registered holder.
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This Note shall be construed and enforced in accordance with, and the rights of
the parties shall be governed by, the law of the State of California excluding
choice-of-law principles of the law of such State that would require the
application of the laws of a jurisdiction other than such State.
California Water Service Company
By
Name:
Title:
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Representations and Warranties
The Company represents and warrants to each Purchaser that:
1. Corporate Organization, Subsidiaries. The Company is duly organized
and existing and in good standing under and by virtue of the laws of the State
of California and is duly authorized and empowered to own and operate its
properties and to carry on its business, all as and in the places where such
properties are now owned and operated and such business is conducted. The
Company has no Subsidiaries.
2. Corporate Authority. The Company has full corporate power and
corporate authority to sell and issue the Series F Notes. The issuance and sale
of the Series F Notes and the execution and delivery of the Fourth Supplement
will have been duly authorized by the Board of Directors of the Company and by
the Public Utilities Commission of the State of California (the "Commission")
prior to the Closing Date, and no other action is required to be taken by, and
no consents or approvals are required to be obtained from, the shareholders of
the Company or any public body or bodies, and no other corporate action of the
Company is requisite to such issue and sale.
3. Business and Property. Each Purchaser has heretofore been furnished
with a copy of the Company Information which generally sets forth the principal
properties of the Company and the business conducted and proposed to be
conducted by the Company.
4. Indebtedness. Annex A attached hereto correctly describes all
Current Debt, Funded Debt and Capitalized Leases of the Company outstanding on
June 30, 2002.
5. Financial Statements and Reports. The Company has furnished each
Purchaser with a copy of its audited financial reports for 1999, 2000 and 2001
hereinafter called the "Company Reports," and a copy of Form 10-K filed by
California Water Service Group ("CWSG") hereinafter called the "CWSG 10-K" with
the Securities and Exchange Commission for 2001, together with all reports or
documents required to be filed by CWSG pursuant to Sections 13(a) or 15(d) of
the Securities Exchange Act of 1934, as amended, since the filing of the CWSG
10-K. The Company has also furnished each Purchaser with an unaudited quarterly
financial statement for the Company for the fiscal quarter ended June 30, 2002,
and Forms 10 Q for CWSG for the fiscal quarter ended June 30, 2002 (the
"Quarterly Reports"). The financial statements contained in the foregoing
Company Reports, the CWSG 10-K, the Quarterly Reports and such other reports and
documents were prepared in accordance with generally accepted accounting
principles upon a consistent basis and are complete and correct and the balance
sheets included therein fairly present the financial condition of the Company or
CWSG, as the case may be, as at the respective dates thereof and the Statements
of Income, Common Shareholders' Equity and Cash Flows included therein fairly
present the results of the operations of the Company for the periods covered
thereby, subject in the case of unaudited statements to normal year-end
adjustments.
6. Material Contracts. The Company has no contracts or commitments,
whether contingent or other, which are material to the Company and which were
not made in the ordinary course of business. Certain material contracts related
to water supply are listed in Annex B hereto. The Company has no contracts or
commitments, contingent or other, which materially and adversely affect or in
the future may (so far as the Company can foresee) materially and adversely
affect the Company or its business, property, assets, operations or condition,
financial or other. As at December 31, 2001, there were no material liabilities
of the Company (other than those under contracts entered into in the normal and
ordinary course of business), actual, contingent or accrued, which were not
reflected in the Company Reports and CWSG 10-K except for (i) liability in
respect of uncompleted construction work under open contracts in connection with
the Company's construction program and (ii) the obligations of the Company to
contribute to a pension plan, an employees' savings plan and a health and
welfare plan.
7. No Material Adverse Change. (a) There has been no change in the
condition of the Company, financial or other, from that set forth or reflected
in the Company Information, other than changes which may have occurred in the
ordinary course of business or by reason of ordinary dividends paid or declared
or outstanding First Mortgage Bonds redeemed by the Company in accordance with
their terms, and no such changes in the ordinary course of business have been
material adverse changes.
(b) Since December 31, 2001, neither the business, operations,
properties nor assets of the Company have been adversely affected in any
material way by any casualties such as fire, windstorm, riot, strike, explosion,
accident, flood, earthquake, lockout, sabotage, activities of armed forces, act
of God or
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the public enemy or condemnation of properties by the United States government
or any municipal governmental agency, authority or body.
8. Title to Properties. The Company is engaged in the business of a
public utility water company serving all or a portion of the California cities
and communities listed in the 2001 Company Report and paragraph 9 hereof. The
Company has good and merchantable title, subject only to the lien of the
Mortgage Indenture and to current tax and assessment liens, rights-of-way,
easements and certain minor liens, encumbrances, clouds or defects in title
which do not materially affect the use thereof, to all the material water
distribution facilities (including, without limitation, transmission and
distribution mains, pump stations, xxxxx, storage tanks and reservoirs) and
other material units of property used in its business except as follows:
(a) some of the offices, but not its principal office, are in leased
premises and some xxxxx, well sites and other minor distribution facilities are
rented; and
(b) several xxxxx are located on property which the Company does not
own but in which it has an easement for the location of such xxxxx; and except
as to easements and rights-of-way and certain parcels of land (not exceeding for
said parcels of land an aggregate book value of $1,000,000) with respect to
which there is a possibility of reverter if the property ceases to be used for
public utility purposes, and, except that the greater portion of its
transmission and distribution systems is located in public highways and streets
and in rights-of-way owned by the Company over lands of others, the Company's
title thereto is fee simple.
Except for parcels of land having an aggregate book value of not more
than $1,000,000, the Company has good and merchantable title to all its other
property and assets subject only to the lien of the Mortgage Indenture and the
lien of the Xxxxxxxxx Mortgage Indenture and to current tax and assessment liens
and minor liens and encumbrances which do not materially affect the use thereof.
All of the properties of the Company are located in the State of California and
substantially all of the properties of the Company used or useful in its public
utility business are subject to the Mortgage Indenture.
As used herein, the term "Xxxxxxxxx Mortgage Indenture" means the Trust
Indenture dated as of August 1, 1954, as supplemented from time to time, between
the Company, as successor to Xxxxxxxxx Water Company ("Xxxxxxxxx") and U.S.
Bank, as Trustee, which provides a lien on properties owned by Xxxxxxxxx
immediately prior to the merger described in paragraph 9 hereof which lien
secures $9,000,000 in aggregate principal amount of Dominguez bonds which were
assumed by the Company upon the merger.
9. Franchises. The Company has, in its judgment, adequate franchises
and permits without burdensome restrictions (other than those typically
contained in franchises and permits of this type) to allow the Company to
conduct the business in which it is engaged. The Company has two classes of
franchises to install and operate water pipes and mains under public streets and
highways:
(a) so-called "constitutional" franchises obtained by virtue of the
provisions of Article XI, Section 19, of the California Constitution, as in
effect prior to 1911; and
(b) franchises granted pursuant to statutory authority. The Company
believes, based on the advice of counsel (which is itself based upon the
assumption of the accuracy of information obtained by the Company from sources
believed to be reliable that the following cities served by the Company were all
incorporated prior to 1911:
Bakersfield Marysville South San Xxxxxxxxx
Xxxxx Oroville Stockton
Dixon Redondo Beach Visalia
Hermosa Beach Xxxxxxx Willows
King City San Mateo
Xxxxxxxxx Xxxxx
The water distribution systems were constructed and service furnished
to the inhabitants of each by various predecessors of the Company prior to 1911,
and that there were no public water works owned or controlled by the
municipality in any of them prior to 1911), that the Company has a
"constitutional" franchise in each of the above cities and under such
constitutional franchise has a perpetual right which was not repealed by the
repeal of Article XI, Section 19, of the California Constitution to continue to
occupy public streets of each of said cities with its pipes and mains and to lay
down additional pipes and mains in said streets for the supplying of water,
subject to reasonable regulation by the respective municipalities.
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The Company also believes, based on the advice of counsel, that this
right is not limited to streets in which pipes or mains were laid prior to 1911
but extends at least to all streets in the said municipalities as they existed
at the date of repeal of the constitutional provision in 1911 and probably also
extends to territory incorporated into each respective city after such repeal,
although this latter question remains somewhat in doubt in the absence of a
final decision of the courts thereon.
The Company holds either by assignment or as original grantee
franchises granted under statutory authority by the Counties of Xxxx, Los
Angeles, San Xxxxxxx, Santa Xxxxx and Monterey, the Cities of Montebello,
Torrance, Cupertino, Sunnyvale, Los Altos, Mountain View, Bakersfield, Commerce,
San Xxxxxx, Rolling Hills Estates and Thousand Oaks, and the Towns of Los Altos
Hills and Xxxxxxxx. Following incorporation of the City of Rancho Palos Verdes
in 1973, the Company made franchise payments to the City and the City accepted
the same as successor in interest to the grantor's rights under the Company's
former franchise from the County of Los Angeles; the City has agreed that the
Company may exercise its rights in the City under its current County franchise
until the expiration of that franchise in 2012.
The Company's franchises from the Cities of Palos Verdes Estates, Menlo
Park and Woodside terminated in 1977, 1993 and 1994, respectively. While none of
the Cities and the Company have executed a new franchise agreement, the Company
has made and will continue to make franchise payments to each of the Cities in
accordance with the provisions of the prior franchise. In other areas where the
Company has no franchise, the Company or its predecessors have distributed water
for many years and, to the Company's knowledge, no question has ever been raised
as to the right to make such distribution and to maintain all pipes and mains
necessary therefor.
On May 25, 2000, Xxxxxxxxx Service Corporation was merged into the
Company and subsequently Xxxxxxxxx and its subsidiaries were also merged into
the Company (collectively, the "merger"). The Company acquired in the Xxxxxxxxx
merger operations in the following cities, counties, townships or localities
that Xxxxxxxxx previously served:
Xxxxxxx Xxxx County Los Angeles County
Carson Kernville Lucerne Compton
Lake Xxxxxx Mountain Shadows Duncans Xxxxx
Lakeland Onyx Fremont Valley
Lancaster Squirrel Valley Guerneville
Xxxxx Valley Torrance Harbor City
Long Beach Xxxxxxx Heights
Water distribution systems were constructed and service furnished to
the inhabitants of the localities currently known as Carson, Compton, Harbor
City, Long Beach and Torrance by various predecessors of the Company prior to
1911 and the Company believes that it has a prior right to operate in these
locations which right was not extinguished by the incorporation of these cities
subsequent to 1911. Except as noted below, Xxxxxxxxx has no franchises from
these cities and has made no franchise payments to them and, to the Company's
knowledge, no question has ever been raised as to the right to make water
distribution and to maintain all pipes and mains necessary therefor.
As to the remaining localities, Xxxxxxxxx has received written
franchise agreements which are in full force and effect and has paid all
franchise fees to date, with the exception of Compton and the City of Xxxxxx
Redevelopment Project #2, as to which the franchises expired without renewal in,
respectively, 1994 and 1998. Xxxxxxxxx continued to provide water services to
Compton and the City of Xxxxxx Redevelopment Project #2 subsequent to the
expiration of the respective franchises, and to pay franchise fees, and to the
Company's knowledge no question has ever been raised as to the right to make
such distribution and to maintain all pipes and mains necessary therefor.
10. Condition of Assets. The physical assets of the Company are in
sound operating condition, there are no material arrears in the maintenance of
any such physical assets and the Company believes that its sources of water are
adequate to meet its requirements for the foreseeable future.
11. Pending Litigation, Proceedings. (a) There are no actions, suits or
proceedings pending at law or in equity or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or, to the knowledge of the Company,
threatened against or affecting the Company not adequately covered by insurance
or for which
14
reserves adequate in the Company's judgment have not been established which
involve, in the opinion of the Company, a reasonable possibility of judgments or
liabilities exceeding $500,000 in the aggregate net of insurance, or which may,
in the opinion of the Company result in any material adverse change in the
business or properties or in the condition, financial or other, of the Company,
or the ability of the Company to perform its obligations under the Fourth
Supplement or the Series F Notes.
(b) There are no proceedings pending or, to the knowledge of the
Company, threatened against the Company before or by any federal, state or
municipal commission, board or other administrative agency, which materially and
adversely affect the water rates of the Company presently in effect.
(c) The Company is not in default with respect to any order, writ,
injunction or decree of any court, or any federal, state or municipal
commission, board or other administrative agency and the Company has complied
with all applicable statutes and regulations of the United States of America and
of any state, municipality or agency of any thereof, in respect of the conduct
of its business known or believed by the Company to be applicable thereto, the
failure to comply with which could reasonably be expected to have a material
adverse effect on the Company or its properties.
12. No Condemnation Proceedings. Since January 1, 1995, no elections
have been held or other actions taken authorizing the commencement of
proceedings for condemnation of any of the properties of the Company. However,
from time to time there are expressions of interest made by public bodies,
elected or appointed municipal officials, persons seeking political position or
citizens groups urging acquisition of the Company's facilities in one or more of
the communities served by the Company. The Company does not believe that any
acquisition by a city or municipality of its properties by condemnation or
threat thereof would be adverse to the holders of the Series F Notes.
13. No Burdensome Restrictions. The Company is not subject to any
burdensome corporate restrictions in its Articles of Incorporation, By-Laws or
otherwise, which materially and adversely affect or in the future may (so far as
the Company can foresee) materially and adversely affect the Company or its
business, property, assets, operations or condition, financial or other.
14. Regulatory Status, Approval. (a) The Company is not a registered
holding company or a subsidiary of a registered holding company and the Company
is not required to register under the Public Utility Holding Company Act of
1935, as amended. The Company is subject to the jurisdiction of the Commission.
(b) No consent of, approval or authorization by, filing or registration
with, or notice to any governmental or public authority or agency is required
for the issuance, sale or delivery of the Series F Notes or the execution,
delivery or performance of the Fourth Supplement, other than the authorization
of the Commission, which authorization has been duly obtained, is in full force
and effect and is not subject to any appeal, hearing, rehearing or contest. All
conditions contained in any such authorization which were to be fulfilled on or
prior to the issuance of the Series F Notes have been fulfilled. The Company has
furnished to your special counsel true, correct and complete copies of said
authorization and all applications heretofore filed with or submitted to the
Commission in connection with its action to obtain said authorization.
15. No Defaults, Compliance with Other Instruments. The Company is not
in default under any outstanding indentures, contracts or agreements which are
material to the Company including, without limitation, the Mortgage Indenture;
and on the Closing Date there will not exist any condition which would be a
default under any such indenture, contract or agreement. The execution and
delivery of the Fourth Supplement, the consummation of the transactions therein
provided for and compliance with the provisions of the Fourth Supplement and the
Series F Notes by the Company will not violate or result in any breach of the
terms, conditions or provisions of, or constitute a default under, its Articles
of Incorporation, By-Laws or any indenture, mortgage, deed of trust, bank loan
or credit agreement, or other material agreement or instrument to which the
Company is a party or by which the Company may be bound, nor will such acts
result in the violation of any applicable law, rule, regulation or order
applicable to the Company of any court or governmental authority having
jurisdiction in the premises or in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever, upon any property or assets of
the Company.
16. Leases. The Company has the right to, and does, enjoy peaceful and
undisturbed possession under all material leases to which it is a party or under
which it is operating. All such leases are valid, subsisting and in full force
and effect, and the Company is not in default under any thereof and no event has
occurred and is continuing, and no condition exists that, after notice or
passage of time or both could become a material default under any such Lease.
15
17. Use of Proceeds. The Company will use the gross proceeds derived
from the sale of the Series F Notes under the Fourth Supplement to refinance
existing Indebtedness and to finance a portion of the Company's general
construction program. None of the transactions contemplated in the Fourth
Supplement (including, without limitation thereof, the use of the proceeds from
the sale of the Series F Notes) will violate or result in a violation of Section
7 of the Securities Exchange Act of 1934, as amended, or any regulations issued
pursuant thereto, including without limitation, Regulations U, T and X of the
Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II. The
Company does not own or intend to carry or purchase any "margin stock" within
the meaning of said Regulation U, including margin stock originally issued by
it. None of the proceeds from the sale of the Series F Notes will be used to
purchase or carry (or refinance any borrowing the proceeds of which were used to
purchase or carry) any margin stock.
18. ERISA. (a) The fair market value of all assets under all "employee
pension benefit plans" (as such term is defined in Section 3(2) of ERISA),
maintained by the Company, as from time to time in effect, exceeded as of
December 31, 2001, the last annual valuation date, the actuarial present value
of all benefits vested under the Plans by more than $10,898,000.
(b) Neither any of the Plans nor any of the trusts created thereunder,
nor any trustee or administrator thereof, has engaged in a "prohibited
transaction," as such term is defined in Section 4975 of the Code which could
subject the Plans or any of them, any such trust, or any trustee or
administrator thereof, or any disqualified person with respect to the Plans to
the tax or penalty on prohibited transactions imposed by said Section 4975,
except that, with respect to any actions or omissions of administrators,
trustees, other fiduciaries, parties in interest or disqualified persons of or
in respect to the Plans (other than employees of the Company), the Company has
no knowledge that any of such persons has committed a prohibited transaction,
nor has the Company participated knowingly in or knowingly undertaken to conceal
a prohibited transaction with or by any of such persons nor enabled any of them
to commit a prohibited transaction.
(c) Neither any of the Plans subject to Title IV of ERISA nor any
trusts related to such plans have been terminated, nor have there been any
Reportable Events, as that term is defined in Section 4043 of ERISA (as modified
by the regulations thereunder), in respect of those plans since the effective
date of ERISA.
(d) Neither any of the Plans which are subject to Section 302 of ERISA
nor any trusts related to such plans have incurred any "accumulated funding
deficiency," as such term is defined in said Section 302 (whether or not
waived), since the effective date of ERISA.
(e) The consummation of the transactions provided for in the Fourth
Supplement and compliance by the Company with the provisions thereof and the
Series F Notes issued thereunder will not involve any prohibited transaction
within the meaning of ERISA or Section 4975 of the Code.
19. Taxes. All Federal, state and local taxes and assessments due from
the Company have been (a) fully paid or adequately provided for on the books of
the Company in accordance with generally accepted accounting principles or (b)
are being contested in good faith by the Company. There has been no examination
of the Federal income tax returns of the Company by the Internal Revenue Service
subsequent to the examinations of the returns for tax years 1984-1991.
20. Compliance with Laws. To the best of the Company's knowledge, after
due inquiry, the Company is in compliance with all applicable Federal, state, or
local laws, statutes, rules, regulations or ordinances relating to public heath,
safety or the environment, including, without limitation, relating to releases,
discharges, emissions or disposals to air, water, land or ground water, to the
withdrawal or use of ground water, to the use, handling or disposal of
polychlorinated biphenyls (PCB's), asbestos or urea formaldehyde, to the
treatment, storage, disposal or management of hazardous substances (including,
without limitation, petroleum, its derivatives, by-products or other
hydrocarbons), and to exposure to hazardous substances, the failure to comply
with which could reasonably be expected to have a material adverse effect on the
Company or its properties. Except as disclosed in the "Environmental Matters"
section of Item 1 of the CWSG 10-K, the "Environmental Matters" section of
CWSG's 2001 Annual Report and the "Legal Proceedings" section of Item 3 of the
CWSG 10-K with respect to matters in Chico and Marysville, California, the
Company does not know of any liability of the Company under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986 (42 U.S.C. Section 9601
et seq.) with respect to any property now or heretofore owned or leased by the
Company.
16
21. Full Disclosure. The financial statements referred to in the Fourth
Supplement do not, nor does the Fourth Supplement, the Company Information or
any written statement (including without limitation the 2001 Company Report and
the 2001 CWSG Report) furnished by the Company to you in connection with the
negotiation of the sale of the Series F Notes, contain any untrue statement of a
material fact or, taken together, omit a material fact necessary to make the
statements contained therein or herein not misleading. There is no fact which
the Company has not disclosed to you in writing which materially affects
adversely nor, so far as the Company can now foresee, will materially affect
adversely the properties, business, prospects, profits or condition (financial
or otherwise) of the Company or the ability of the Company to perform its
obligations under the Note Agreement, the Fourth Supplement or the Series F
Notes.
22. Private Offering. Neither the Company, directly or indirectly, nor
any agent on its behalf has offered or will offer the Series F Notes or any
similar Security or has solicited or will solicit an offer to acquire the Series
F Notes or any similar Security from or has otherwise approached or negotiated
or will approach or negotiate in respect of the Series F Notes or any similar
Security with any Person other than the Purchasers. Neither the Company,
directly or indirectly, nor any agent on its behalf has offered or will offer
the Series F Notes or any similar Security or has solicited or will solicit an
offer to acquire the Series F Notes or any similar Security from any Person so
as to cause the issuance and sale of the Series F Notes not to be exempt from
the provisions of Section 5 of the Securities Act of 1933, as amended.
17
Current Debt, Funded Debt and Capitalized Leases
as of June 30, 2002
1. Current Debt
$24,000,000 borrowed under the Company's bank short-term line of credit
with Bank of America.
2. Funded Debt
$111,865,000 outstanding under the Company's various series of First
Mortgage Bonds with due dates ranging from 2002 to 2023.
$4,000,000 First Mortgage Bonds, Series J due 2023 (formerly Xxxxxxxxx
Water Company).
$5,000,000 First Mortgage Bonds, Series K due 2012 (formerly Xxxxxxxxx
Water Company).
$20,000,000 Series A Senior Notes due November 1, 2025.
$20,000,000 Series B Senior Notes due November 1, 2028.
$20,000,000 Series C Senior Notes due November 1, 2030.
$20,000,000 Series D Senior Notes due November 1, 2031.
$20,000,000 Series E Senior Notes due May 1, 2032.
$2, 818,000 California Department of Water Resources Loans maturing
2011 to 2032.
$459,000 obligations due on water system acquisitions.
3. Capitalized Leases
None.
Material Water Supply Contracts
1. Water Supply Contract between the Company and the County of Butte relating to
the Company's Oroville District.
2. Water Supply Contract between the Company and Xxxx County Water Agency
relating to the Company's Bakersfield District.
3. Water Supply Contract between the Company and Stockton East Water District
relating to the Company's Stockton District.
4. Amended Contract between the Company and Stockton East Water District
relating to the Company's Stockton District.
5. Settlement Agreement and Master Water Sales Contract between the City and
County of San Francisco and Certain Suburban Purchasers.
6. Supplement to Settlement Agreement and Master Water Sales Contract between
the Company and the City and County of San Francisco relating to the Company's
Bear Gulch District.
7. Supplement to Settlement Agreement and Master Water Sales Contract between
the Company and the City and County of San Francisco relating to the Company's
San Xxxxxx District.
8. Supplement to Settlement Agreement and Master Water Sales Contract between
the Company and the City and County of San Francisco relating to the Company's
San Mateo District.
9. Supplement to Settlement Agreement and Master Water Sales Contract between
the Company and the City and County of San Francisco relating to the Company's
South San Francisco District.
10. Water Supply Contract between the Company and Santa Xxxxx Valley Water
District relating to the Company's Los Altos District.
11. Water Supply Contract between the Company and Pacific Gas and Electric
Company related to the Company's Oroville District.
12. Water Supply Contract between the Company and Alameda County Flood Control
and Water Conservation District related to the Company's Livermore District.
13. Water Supply Contract between the Company, ARCO Products Company and West
Basin Municipal Water District relating to recycled water.
Description of Closing Opinion
of Counsel to the Company
18
The closing opinion of Xxxxxxx XxXxxxxxx LLP, counsel for the Company, which is
called for by Section 5(a)(iii) of the Fourth Supplement, shall be dated the
Closing Date and addressed to the Purchasers, shall be satisfactory in scope and
form to the Purchasers and shall be to the effect that:
1. The Company is a corporation duly incorporated, validly existing and
in corporate good standing under the laws of California.
2. The execution and delivery by the Company of the Note Agreement, the
Fourth Supplement and the Notes, and the performance by the Company of its
obligations under the Note Agreement, the Fourth Supplement and the Notes, are
within the Company's corporate powers and have been duly authorized by all
requisite corporate action on the part of the Company. The Company has duly
executed and delivered the Note Agreement, the Fourth Supplement and the Notes.
3. Each of the Note Agreement, the Fourth Supplement and the Notes
constitutes a valid and binding agreement of the Company, enforceable against
the Company in accordance with its terms.
4. The execution and delivery by the Company of the Note Documents, and
compliance by the Company with the provisions thereof (i) will not, to the best
of our knowledge, result in a breach or default (or give rise to any right of
termination, cancellation or acceleration) under the Articles of Incorporation
or By-Laws of the Company, or the Mortgage Indenture, the Credit Agreement dated
as of July 31, 2001, between the Company and Bank of America as Administrative
Agent, or any agreement or other instrument that is listed as a material
contract in CWSG's Annual Report on Form 10-K for the year ended December 31,
2001. To the best of our knowledge, no consent or approval by, or any
notification of or filing with, any court, public body or authority of the State
of California is required to be obtained or effected by the Company in
connection with the execution, delivery and performance by the Company of the
Note Documents or the issuance or sale of the Notes, except for the
authorization of the Commission, which authorization has been duly obtained and
is in full force and effect.
5. Based upon the representations set forth in Section 6 of the Fourth
Supplement, the accuracy of which we have not independently verified or
investigated, the issuance, sale and delivery of the Notes under the
circumstances contemplated by the Fourth Supplement do not, under existing law,
require the registration of the Notes under the Securities Act of 1933, as
amended, or the qualification of the Fourth Supplement or an indenture under the
Trust Indenture Act of 1939, as amended.
6. Based upon the assumption of the accuracy of information obtained by
the Company from sources believed by the Company to be reliable (a) that the
following cities served by the Company were all incorporated prior to 1911:
Bakersfield
Marysville
South San Xxxxxxxxx
Xxxxx
Oroville
Stockton
Dixon
Redondo Beach
Visalia
Hermosa Beach
Xxxxxxx
Willows
King City
San Mateo
Xxxxxxxxx
Xxxxx
19
(b) that water distribution systems were constructed and service
furnished to the inhabitants of each by various predecessors of the Company
prior to 1911; and
(c) that there were no public water works owned or controlled by the
municipality in any of them prior to 1911; in our opinion,
(i) the Company has a "constitutional" franchise in each of the above
cities and under such "constitutional" franchise has a perpetual right which was
not repealed by the repeal of Article XI, Section 19, of the California
Constitution to continue to occupy public streets of each of said cities with
pipes and mains and to lay down additional pipes and mains in said streets for
the supplying of water, subject to reasonable regulation by the respective
municipalities;
(ii) this right is not limited to streets in which pipes or mains were
laid prior to 1911 but extends at least to all streets in the said
municipalities as they existed at the date of repeal of the constitutional
provision in 1911; and
(iii) the right probably also extends to territory annexed into each
respective city after such repeal, although this latter question is not entirely
free from doubt in the absence of a final decision of the courts thereon.
7. Xxxxxxxxx Services Corporation (along with its subsidiaries,
"Xxxxxxxxx") was merged into the Company effective May 25, 2000 and Xxxxxxxxx
Water Company was also merged into the Company effective October 12, 2000. In
the Xxxxxxxxx mergers, the Company acquired the operations of Xxxxxxxxx, which
to our knowledge included service to the following cities, counties, townships
or localities:
Bodfish Kernville Mountain Shadows Carson Lake Xxxxxx Onyx
Compton Lakeland Torrance Duncans Xxxxx Lancaster
Squirrel Valley Fremont Valley Xxxxx Valley Xxxxxxx Heights
Guerneville Long Beach Los Angeles County
Harbor City Lucerne Xxxx County
8. We note that the Officers' Certificates state that: (a) to the
Company's knowledge, water distribution systems were constructed and service
furnished to the inhabitants of the localities currently known as Carson,
Compton, Harbor City, Long Beach and Torrance by various predecessors of the
Company prior to 1911; (b) the Company believes that it has a prior right to
operate in these locations which right was not extinguished by the incorporation
of these cities subsequent to 1911; (c) except as noted below, to the Company's
knowledge Xxxxxxxxx has no franchises from these cities and has made no
franchise payments to them; and (d) to the Company's knowledge, no question has
ever been raised as to the right to make water distribution and to maintain all
pipes and mains necessary therefor.
9. We note that the Officers' Certificates state that: (a) as to the
remaining localities listed in paragraph 7, to the Company's knowledge,
Xxxxxxxxx has received written franchise agreements which are in full force and
effect and has paid all franchise fees to date, with the exception of Compton
and the City of Xxxxxx Redevelopment Project #2, as to which the franchises
expired without renewal in, respectively, 1994 and 1998; (b) to the Company's
knowledge, Xxxxxxxxx continued to provide water services to Compton and the City
of Xxxxxx Redevelopment Project #2 subsequent to the expiration of the
respective franchises, and to pay franchise fees; and (c) to the Company's
knowledge, no question has ever been raised as to the right to make such
distribution and to maintain all pipes and mains necessary therefor. The opinion
of Xxxxxxx XxXxxxxxx LLP shall cover such other matters relating to the sale of
the Series F Notes as the Purchasers may reasonably request. With respect to
matters of fact on which such opinion is based, such counsel shall be entitled
to rely on appropriate certificates of public officials and officers of the
Company.
Description of Special Counsel's Closing Opinion
The closing opinion of Xxxxxxx and Xxxxxx, special counsel to the
Purchasers, called for by Section 5(a)(iii) of the Fourth Supplement, shall be
dated the Closing Date and addressed to the Purchasers, shall be satisfactory in
form and substance to the Purchasers and shall be to the effect that:
20
1. The Company is a corporation, validly existing and in good standing
under the laws of the State of California and has the corporate power and the
corporate authority to execute and deliver the Fourth Supplement and to issue
the Series F Notes.
2. The Note Agreement and the Fourth Supplement have been duly
authorized by all necessary corporate action on the part of the Company, have
been duly executed and delivered by the Company and constitute the legal, valid
and binding contract of the Company enforceable in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent conveyance and similar laws
affecting creditors' rights generally, and general principles of equity
(regardless of whether the application of such principles is considered in a
proceeding in equity or at law).
3. The Series F Notes have been duly authorized by all necessary
corporate action on the part of the Company, have been duly executed and
delivered by the Company and constitute the legal, valid and binding obligations
of the Company enforceable in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent conveyance and similar laws affecting
creditors' rights generally, and general principles of equity (regardless of
whether the application of such principles is considered in a proceeding in
equity or at law).
4. The issuance, sale and delivery of the Series F Notes under the
circumstances contemplated by the Fourth Supplement do not, under existing law,
require the registration of the Series F Notes under the Securities Act of 1933,
as amended, or the qualification of an indenture under the Trust Indenture Act
of 1939, as amended.
The opinion of Xxxxxxx and Xxxxxx may rely upon the opinion of Xxxxxxx
XxXxxxxxx LLP as to matters of California law. The opinion of Xxxxxxx and Xxxxxx
shall also state that the opinion of Xxxxxxx XxXxxxxxx LLP is satisfactory in
scope and form to Xxxxxxx and Xxxxxx and that, in their opinion, the Purchasers
are justified in relying thereon.
In rendering the opinion set forth in paragraph 1 above, Xxxxxxx and
Xxxxxx may rely, as to matters referred to in paragraph 1, solely upon an
examination of the Articles of Incorporation certified by, and a certificate of
good standing of the Company from, the Secretary of State of the State of
California, the By-laws of the Company and the general business corporation law
of the State of California.
With respect to matters of fact upon which such opinion is based,
Xxxxxxx and Xxxxxx may rely on appropriate certificates of public officials and
officers of the Company and upon representations of the Company and the
Purchasers delivered in connection with the issuance and sale of the Series F
Notes.
21
